Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
3 Jan 2013
Case Brief
The Reserve Bank of India cancelled the licence of Swami Samarth Sahakari Bank Ltd., Akkalkot, Solapur, Maharashtra, effective from the close of business on December 28, 2012. RBI said the bank had ceased to be solvent, revival efforts had failed, and continued uncertainty was inconveniencing depositors. The release details repeated deterioration in the bank’s financial position, including negative net worth and CRAR, high NPAs, erosion of deposits, accumulated losses, and defaults in CRR and SLR maintenance. RBI also recorded serious irregularities and violations, including non-compliance with several provisions of the Banking Regulation Act, 1949 as applicable to co-operative societies. Before cancellation, the bank had already been placed under all-inclusive directions under section 35A and issued a show-cause notice. RBI stated that, with cancellation and liquidation, the process of paying insured deposits under the DICGC scheme would begin, and the bank would be prohibited from carrying on banking business.
Why RBI Acted
RBI cancelled the banking licence of Swami Samarth Sahakari Bank Ltd., Akkalkot, Solapur, Maharashtra, after concluding that the bank had ceased to be solvent and that attempts to revive it had failed. The release cites worsening financials over several inspections: negative net worth, negative CRAR, high gross and net NPAs, erosion of deposits, losses, and defaults in CRR/SLR maintenance. RBI also notes non-compliance with provisions including sections 11(1), 18, 20A, 22(3)(a), 22(3)(b), 24, 29 and 31 of the Banking Regulation Act, 1949 (as applicable to co-operative societies), and states that the bank’s affairs were being conducted in a manner detrimental to depositors’ interests. The cancellation was preceded by all-inclusive directions under section 35A and a show-cause notice under section 22 of the Act.
Operating Impact
The bank can no longer carry on banking business. Liquidation proceedings are to follow, and depositors will be paid only to the extent insured under the DICGC scheme, subject to its terms and conditions. Uninsured depositors and other stakeholders face recovery risk, and the Registrar of Co-operative Societies was requested to appoint a liquidator.
Regulatory Basis
- section 35 of the Banking Regulation Act, 1949 (As Applicable to Co-operative Societies)
- section 35 A of the Act
- section 22 of the Act
- sections 11(1), 18, 20A, 22(3) (a), 22(3) (b), 24, 29 and 31 of the Act
- section 5(b) of the Act
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 28 Dec 2012
- Effective From
- 28 Dec 2012
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank